August 8, 2005
U.N. Inquiry Says Oil-for-Food Chief Accepted Kickbacks
By WARREN HOGE
The commission investigating the United Nations oil-for-food program in Iraq today accused the program's director, Benon V. Sevan, of accepting money from kickbacks in Iraqi oil sales and accused a second United Nations official of soliciting a bribe from a program contractor.
The panel, led by Paul A. Volcker, the former Federal Reserve chairman, said that Mr. Sevan had accumulated at least $150,000 in his New York accounts from exploiting the program that he headed and that Alexander V. Yakovlev, a procurement officer, had sought money in exchange for confidential bidding information.
While the bribe offer was unsuccessful, the committee said it had turned up persuasive evidence that Mr. Yakovlev gained as much as $1.3 million in payments from contractors in other United Nations programs and deposited it in an offshore account.
Past reports from the Volcker panel have exposed instances of regulations violations and conflicts of interest, but today's was the first to accuse United Nations officials of outright corruption and personal benefit.
In response to the report, Mr. Sevan sent a letter on Sunday to Secretary General Kofi Annan denying the charges and saying he was being scapegoated by enemies of the United Nations.
As I predicted, he wrote, a high-profile investigative body invested with absolute power would feel compelled to target someone, and that someone has turned out to be me. The charges are false, and you, who have known me all these years, should know that they are false.
Mr. Sevan said he was resigning the $1-a-year job as Mr. Annan's adviser, which he had held since retiring from the United Nations last year.
The report - 88 pages with a 39-page appendix - was the third from the Independent Inquiry Committee, which Mr. Annan asked to investigate the $65 billion program under which Iraqi oil revenue was used to buy relief goods for Iraqis strapped by United Nations sanctions but which was exploited by Saddam Hussein to skim $1.7 billion in illegal profits.
Mr. Annan himself was mentioned only in passing in the new report, and the committee said its remaining questions about whether he had influenced the awarding of a contract to a company that employed his son Kojo Annan would be answered in the panel's definitive report, expected early in September.
In its last report, in March, the committee said that Mr. Annan had had no prior knowledge of the contract, but since then, investigators have been pursuing new allegations of meetings at which the contract might have been discussed in his presence.
Noting that it was a fact-finding mission and not a law enforcement body, the committee said that it was cooperating with other investigations and that Mr. Volcker had urged Mr. Annan to remove diplomatic immunity from any official under investigation by proper law enforcement bodies -- something Mr. Annan has said he will do. The Manhattan district attorney, Robert M. Morgenthau, announced last month that he had opened a criminal investigation of Mr. Sevan.
According to the committee, Mr. Sevan profited from illegal Iraqi oil allocations through a hidden arrangement with two Egyptian friends, Efraim Nadler and Fakhry Abdelnour. Mr. Abdelnour was president of African Middle East Petroleum Co. Ltd. Inc., or AMEP, a small oil-trading company that Mr. Sevan is accused of favoring, and Mr. Nadler, who is known as Fred, was newly revealed by investigators to be the treasurer of the company.
The committee said that from 1998 to 2001, in a series of transactions that the committee said were deliberately fashioned to be difficult to trace, AMEP transferred $579,669 in proceeds from Iraqi oil sales to Caisor Services Inc. in Geneva, a firm that did nothing other than serve as a bank account for Mr. Nadler.
The report said that Mr. Nadler withdrew $432,983 between November 1998 and October 2001, including $257,000 in cash on dates that coincided with periods when Mr. Sevan made $147,184 in cash deposits to New York accounts in his and his wife's name.
The committee said that in addition to receiving money from the scheme, Mr. Sevan and Mr. Nadler knew that Mr. Abdelnour had paid illegal surcharges to the Saddam regime.
Investigators also turned aside claims by the men that they were just passing acquaintances, detailing 868 phone calls between them from 1998 to 2001. Much of the telephone traffic corresponded with moments when money was being transferred between them, the committee said.
The committee suggested that the corrupt proceeds might be greater, noting that its further investigation had been thwarted by Mr. Sevan's ending cooperation with the panel when the new evidence emerged and Mr. Nadler's refusal to answer any requests for information and interviews.
The committee said that Mr. Sevan's motivation might have been getting out of the precarious financial situation that he found himself in 1997, when his checking account balances hovered near zero and he was overdrawn on other accounts.
Starting in 1998, his prospects improved dramatically, the committee said, and his New York bank accounts grew through a pattern of cash deposits in $100 bills.
The committee said it did not accept Mr. Sevan's explanation that an additional $160,000, whose origins have been in dispute, had come from an aunt who has since died. The panel said that the woman, a government photographer in Cyprus, had no access to such wealth.
Mr. Yakovlev was accused of seeking bribes in June 1996 from Societe General de Surveillance S.A., known as S.G.S., in return for furnishing the company with confidential information during competitive bidding on an oil inspection contract. It said the company did not accept the offer and, when asked about it, assisted Mr. Volcker's inspectors in uncovering Mr. Yakovlev's involvement.
The other person participating in the scheme, it said, was Yves Pintore, identified only as a friend from France. Jeffrey Newell, an S.G.S. vice president, told the committee that he had received faxes with inside information and a calls from Mr. Pintore extending the chance to work with people he represented who were some influential people in the U.N. in New York.
Mr. Newell understood the caller to be requesting that S.G.S. pay a bribe, the report said.
The key document implicating Mr. Yakovlev was an unsigned handwritten fax on June 25, 1996 imploring Mr. Newell to agree to contact Yves that same day agreeing to a lump sum that should not exceed $150,000 to $200,000 and be listed as an additional price for oil-quality testing in order to beat a competing offer from a rival for the contract, Saybolt Eastern Hemisphere BV. Hand writing analysis revealed Mr. Yakovlev to be the author, the committee said.
The committee said that Mr. Yakovlev had denied all knowledge of the arrangement when confronted with the evidence. Since his sudden retirement on June 22 in connection with a conflict of interest case not related to the oil for food program, the committee said, he had resisted all attempts at being interviewed.
In interviews during July, according to the committee, Mr. Pintore also denied any wrongdoing, but on Aug. 1 he sent the panel an e-mail message saying he would not contest the language of its findings.
The report said further that it had persuasive evidence that Mr. Yakovlev, a 52-year-old Russian with 20 years experience in the United Nations's procurement office, had engaged continuously in obtaining payments from contractors to other United Nations programs and depositing them in an offshore bank account.
Since 2000, the report said, almost $1.3 million had been wired into an account in Antigua, in the West Indies, that Mr. Yakovlev controlled. The committee said that it had determined that more than $950,000 of those payments came from companies that had collectively won more than $79 million in United Nations contracts and purchase orders.
The committee acknowledged that Mr. Yakovlev had been a principal source for its earlier report's findings of United Nations contract regulation violations against Joseph J. Stephanides, but it said that the new evidence did not invalidate the information that Mr. Yakovlev provided then and it stood by its charges against Mr. Stephanides.
Mr. Stephanides, a 59-year-old Cypriot, who worked for the United Nations for 25 years, was dismissed by Secretary General Annan in June.